US interest rates are likely to rise by the end of this year following the “favourable” prospects in the jobs market and the economy, Federal Reserve boss Janet Yellen says.
In her testimony for the US House of Representatives Financial Services Committee she states: “If the economy evolves as we expect, economic conditions likely would make it appropriate at some point this year to raise the federal funds rate target, thereby beginning to normalize the stance of monetary policy.
“Indeed, most participants in June projected that an increase in the federal funds target range would likely become appropriate before year-end.”
US interest rates have been kept at a record low of 0 per cent since the financial crises in 2008.
Yellen added that, however, these “projections” do not represent any intent to raise rates “at any particular time”.
The Federal Reserve is widely expected to raise interest rates in September this year. But many analysts argue the central bank will go for a first, though not aggressive, hike in December instead.
In her statement, Yellen also says though the unemployment rate is improving, now standing at 5.3 per cent, there is still “some slack” in labour markets.
She said: “For example, too many people are not searching for a job but would likely do so if the labor market was stronger.”
The Fed chief also warned that the situation in Greece, which “remains difficult”, as well as China’s challenges, could pose some risks to US growth.